CBD and cannabis companies continue to struggle to find reliable payment processing options. Whether credits cards unexpectedly close their accounts, offshore vendors keep their payments, or banks deny them in the first place, CBD and cannabis vendors are at constant risk of losing their payment processing partners.
Deemed high-risk by key influencers in the banking industry, these merchants lack the security and transparency they need to thrive in an increasingly competitive landscape. In addition to continually searching for sustainable payment options, CBD and cannabis sellers are often charged unnecessary fees and high rates.
Historically, traditional payment processors shy away from entering into business relationships with high-risk companies like those that sell CBD or cannabis. Pressured by the likes of VISA, MasterCard, and American Express, smaller financial companies are threatened by the possibility of chargebacks and regulatory fines. As a result, many choose to pass on these partnerships.
Sudden Closures & Withholding of Funds
Currently, reliability is a primary industry concern. Tempted by the growing trade, financial institutions are jumping on the bandwagon, only to reverse course and suddenly close client accounts. Account closures are not only disruptive; they can put a black mark on a business’ record and lead to difficulty in securing future partnerships.
Chargebacks are also a problem for small businesses. Since credit card companies allow customers to reverse transactions for up to six months, most processing companies hold funds for that period of time. Without funds in the bank, many small businesses can fall victim to insufficient cash flow, and ultimately, be forced to close.
Offshore banking might seem like smooth-sailing, but it’s far from easy. Once a company engages in off-shore processing, most U.S. payment companies won’t touch them – at least for a while. Frowning on these relationships, American companies shy away from doing business vendors that have this history. Besides, offshore banking is less secure, often leading to lost or delayed funds. With this unstable type of payment relationship, cash flow can suffer and be a detriment to a merchant’s success.
Alternative payment processors like eDebitDirect can stand alone as a payment solution or help bridge the gap of less reliable options. Diversifying payment methods to include alternative sources will help CBD and cannabis sellers avoid the risks of rejections and closure, paving the way for a stable road to success.